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Audit clears Pelham

PELHAM – November 29, 2017 – More than 200 people attended a special Pelham council meeting Wednesday, to hear the results of a KPMG audit into finances.

There never was $17 million of debt that was not reported on Town of Pelham financial statements.

And while describing a complex series of transactions and land deals that led to the twin-pad arena development underway in east Fonthill, Karen Grogan, a partner at KPMG, said none of the transactions it investigated contravened the Municipal Act or town bylaws.

After months of scrutiny and community concern regarding the town’s project to build a $36-million community centre that includes the ice surfaces, more than 200 people attended a special council meeting Wednesday night held in E.L. Crossley Secondary School’s cafeteria to hear the results of a town-commissioned forensic audit of its finances related to the project.

KPMG was also asked to discuss information the consultant previously presented during a Sept. 5 closed-doors meeting of council, in response to allegations from former Ward 1 Coun. Marvin Junkin who claimed a secret audit of town finances revealed $17 million of debt was never recorded in the town’s books.

Following the meeting, Pelham Mayor Dave Augustyn said councillors had not been privy to the auditor’s report prior to Wednesday’s meeting, and didn’t know what the findings would be.

“I’m very heartened that we now have the answers for the community,” he said. “Again, council wasn’t involved in this. This was staff and KPMG reporting on this and we know the numbers are all accurate, and we can trust them.”

Despite the complexity of the deals the consultant discussed, Augustyn said it’s indicative of a town that is growing.

“I think in communities that aren’t doing anything, nothing happens.”

But the “transactions and agreements” that were part of the town’s project reflect the scope of expanding Pelham’s downtown core to east Fonthill.

Grogan, as well as KPMG senior consultant Tyler Reavell, discussed numerous transactions between the town and developer Fonthill Gardens regarding the sale and purchase of property for the project dating back to 2012, municipal credits provided to the developer and subsequently repurchased by the town, and nearly $1 million per acre paid for property that had previously been valued at far less.

The KPMG representatives also responded to questions received via email from about 50 people, sent in the weeks leading up to the meeting.

Grogan said many of the questions were regarding a parkland over-dedication agreement between the town and developer. The agreement, she said, is not subject to the province’s development charges act, and therefore doesn’t contravene that legislation.

“The Municipal Act contains specific legislation to deal with the issuance of debt, however, since Fonthill Gardens could not compel the town to pay out the (municipal) credits under the agreement, the credits did not constitute debt,” she said. “The town had broad authority to enter into the agreement so long as it did not contravene any portion of the Municipal Act.”

Curtis Harley from a community group called Pelham DEBT said he remains concerned about the town’s finances, despite the presentation.

“It’s debt, debt, debt. We’re working on debt, and it’s accounting terminologies, but at the end of the day, we owe money. We owe a lot of money,” Harley said.

Despite the town’s expectations of paying off that debt through the its future growth, after working in the development industry throughout his career, Harley said the plan doesn’t instil him with much confidence.

“I don’t feel comfortable. When people say it’ll be on time and on budget, that’s a tough statement, and I’ve built some of the largest projects in the province of Ontario.”

Regarding Junkin’s allegations, Grogan said: “I know there has been some confusion in the (news)papers about the $17 million of unreported debt.

“There is no unreported debt.”

Although the town had approved borrowing the money, it “hadn’t gone to the second stage to actually go out and borrow that money, so there was no debt related to the $17 million,” she said.

“In fact, as an update on that, we now understand that the $17 million is actually approximately $9.9 million,” she added.

Asked to comment on the issue following the meeting, Junkin — who resigned his seat at the beginning of November — refused to speak to a reporter from The Standard.

Following the detailed presentation from the consultants, Pelham treasurer Teresa Quinlin discussed financing plans for the community centre — the “town’s largest capital project in your history.”

In addition to fundraising and debt to be paid through development charges, she said the sale of excess land will provide the last piece of the puzzle to fund the community centre.

“Substantial completion and occupancy is still on schedule for June 1 of 2018, which is only six months from now,” she said.

She said the town’s existing long-term debt is about $33.5 million, used to fund projects such as two new fire stations, the community centre as well as infrastructure projects.

Although council has previously approved taking out an additional $9.9 million of debt, she said the full amount has yet to be determined.

The Municipal Act limits municipalities to spending up to 25 per cent of income on debt charges. Even if the town borrows the full approved amount, she said the town would be at about 22 per cent by 2019, or about 18 per cent of its debt limit if it only borrows $5 million.

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